Income Tax Officer-Ward-31(3), Kolkata, Kolkata V. Dilip B Besai (HUF), Kolkata

ITA 2799/KOL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9520 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 20-09-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 16-12-2013
• Court: TRIBUNAL
• Keywords: Business income; Rule of consistency; Question of law
• Section: 143(3); 145; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B , KOLKATA [BEFORE HONBLE SHRI M.BALAGANESH, AM & SHRI S.S. VISWANETHRA RAVI, JM] ITA NOS.2799 & 2800/KOL/2013 ASSESSMENT YEARS : 2006-07 & 2009-10 I.T.O., WARD-31(3), -VERSUS- DILIP B.DESAI, HU F KOLKATA KOLKATA (PAN:AABHD 7897 K) ( APPELLANT ) (RESPONDENT) FOR THE APPELLANT : SHRI NICHOLAS MURMU, JCIT, SR.D R FOR THE RESPONDENT : SHRI VIJAY SHAH, FCA DATE OF HEARING : 20.12.2016. DATE OF PRONOUNCEMENT : 27.01.2017. ORDER PER SHRI M.BALAGANESH, AM THESE APPEALS OF THE REVENUE ARISE OUT OF T HE ORDERS OF THE LEARNED CIT(A)- XIX, KOLKATA IN APPEAL NOS. 261 & 262/CIT(A)-XIX/IT O,WD-31(3),KOL/11-12 DATED 09.09.2013 FOR THE ASST YEARS 2006-07 AND 2009-10 R ESPECTIVELY PASSED AGAINST THE ORDERS OF ASSESSMENT FRAMED BY THE LEARNED AO U/S 1 43(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THERE IS A DELAY OF ABOUT 13 DAYS IN FILING APP EALS BY THE REVENUE. THE SAME HAS BEEN EXPLAINED IN AN AFFIDAVIT FILED BEFORE US. AFT ER CONSIDERING THE REASONS GIVEN IN THE AFFIDAVIT, WE ARE SATISFIED THAT THE DELAY IN F ILING THE APPEALS WAS DUE TO REASONABLE AND SUFFICIENT CAUSE. ACCORDINGLY THE DELAY IN FIL ING THE APPEALS IS CONDONED. 3. THE ONLY ISSUE TO BE DECIDED IN THESE APPEALS OF THE REVENUE IS AS TO WHETHER THE LD CITA IS JUSTIFIED IN TREATING THE ASSESSEE AS AN IN VESTOR OF SHARES AS AGAINST TRADER OF SHARES TREATED BY THE LD AO IN THE FACTS AND CIRCUM STANCES OF THE CASE. 4. THE FACTS FOR THE ASST YEAR 2006-07 ARE ADJUDICA TED HEREIN AND THE DECISION RENDERED THEREON WOULD APPLY WITH EQUAL FORCE FOR A SST YEAR 2009-10 ALSO AS THE FACTS ITA NOS.2800&2799/KOL/2013 DILIP B.DESAII (HUF). A.YR.2009-10 & 2006-07 2 ARE IDENTICAL THEREON EXCEPT WITH VARIANCE IN FIGUR ES AND NUMBER OF SCRIPS HANDLED BY THE ASSESSEE. 5. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE FILED ITS RETURN OF INCOME FOR ASST YEAR 2006-07 ON 31.7.2006 DECLARING TOTAL INCOME OF RS. 1,22,46,624/- AND ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ASSE SSING THE TOTAL INCOME AT RS. 1,22,46,620/- BY THE LD AO. LATER THE LD CIT VIDE HIS ORDER U/S 263 OF THE ACT DATED 25.3.2011 SET ASIDE THE ASSESSMENT FRAMED BY THE LD AO WITH SOME DIRECTIONS. ACCORDINGLY, THE LD AO PURSUANT TO THE LD CITS ORD ER /S 263 OF THE ACT FRAMED THE ASSESSMENT U/S 143(3) / 263 OF THE ACT ON 22.12.201 1. IN THE SAID ASSESSMENT, THE LD AO TREATED THE SHORT CAPITAL GAINS REPORTED BY THE ASSESSEE AS BUSINESS INCOME TREATING THE ASSESSEE AS A TRADER IN SHARES. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS DIRECTED BY THE LD AO TO FURNISH THE C OMPLETE DETAILS OF STCG WITH PERIOD OF HOLDINGS OF SHARES IN DAYS AND OTHER DETA ILS TO EXAMINE THE GENUINENESS OF THE NATURE OF TRANSACTIONS. THE LD AO OBSERVED THA T THE SAME WERE DULY FILED BY THE ASSESSEE AND WERE SUBJECTED TO DUE EXAMINATION. TH E LD AO OBSERVED THAT THE ASSESSEE HAD REPORTED SHORT TERM CAPITAL GAINS (STC G) OF RS 1,21,54,384/- IN THE RETURN OF INCOME AND LONG TERM CAPITAL GAINS (LTCG) OF RS. 1,06,86,185/- AND CLAIMED EXEMPTION U/S 10(38) OF THE ACT FOR RS. 1,06,86,185 /- IN THE RETURN OF INCOME. THE ASSESSEE DERIVED DIVIDEND INCOME OF RS. 2,33,98,095 /- OUT OF INVESTMENTS MADE IN VARIOUS SHARES AND MUTUAL FUNDS. THE MAIN CRUX OF THE LD AOS OBSERVATION OF TREATING THE ASSESSEE AS A TRADER IN SHARES AS AGAI NST THE STATUS OF INVESTOR CLAIMED BY THE ASSESSEE WAS THAT THE ASSESSEE HAD DEALT WITH M ORE NUMBER OF SCRIPS AND HENCE FREQUENCY OF TRANSACTIONS WERE MORE WHICH GOES TO P ROVE THAT IT HAD ONLY DEALT WITH TRADING IN SHARES. APART FROM THIS, HE CONCLUDED T HAT THE HOLDING PERIOD OF SHARES WERE LESS THAN 4 MONTHS AND HENCE THE ASSESSEE NEVER HAD ANY INTENTION TO STAY ON WITH THE INVESTMENT IN SHARES AND MUTUAL FUNDS WITH AN INTEN TION TO EARN DIVIDEND INCOME AND WAS ONLY INTERESTED IN MAKING SHORT TERM BUSINESS G AINS. HE PLACED RELIANCE ON THE CBDT CIRCULAR NO. 4 OF 2007 DATED 15.6.2007 IN THIS REGARD. THE LD AO OBSERVED THAT THE ASSESSEE HAD TRANSACTED IN 44 NUMBERS OF C OMPANIES WHICH IS SUBSTANTIALLY HIGH FROM INVESTORS POINT OF VIEW. SIMILARLY HE OBS ERVED THAT THE ASSESSEE HAD ITA NOS.2800&2799/KOL/2013 DILIP B.DESAII (HUF). A.YR.2009-10 & 2006-07 3 TRANSACTED IN 9 NUMBERS OF MUTUAL FUND SCHEMES WHIC H IS ALSO AGAIN VERY HIGH AND DOES NOT GIVE THE IMPRESSION OF BEING AN INVESTOR. THE LD AO ALSO OBSERVED THAT THE ASSESSEE HAD EARNED TOTAL INCOME AMOUNTING TO RS. 3 ,90,35,034/- OUT OF WHICH PROFIT ON SALE OF INVESTMENT IS RS. 1,54,32,610/- AND DIVI DEND INCOME IS RS. 2,33,98,095/- , THEREBY RESULTING MORE THAN 99.47% OF THE INCOME FR OM DIVIDEND AND DEALING IN SHARES AND SECURITIES AND MUTUAL FUNDS. ACCORDING TO HIM, THIS CLEARLY SHOWED THAT THE ASSESSEES MAIN ACTIVITY IS DEALING IN SHARES ONLY AND JUST TO HAVE BENEFIT OF LOWER TAXATION, HE HAD INTELLIGENTLY SHOWN THE INCOME UND ER THE HEAD INCOME FROM CAPITAL GAINS. THE LD AO ALSO OBSERVED THAT THE TRANSAC TIONS ARE CARRIED OUT REGULARLY, QUANTITIES PURCHASED AND SOLD ARE VERY LARGE AND TH E ASSESSEE HAS CONTACT, ACCESS TO INFORMATION AND NECESSARY QUALIFICATION AND COMPETE NCE TO CARRY OUT THE BUSINESS OF DEALING IN SHARES , SECURITIES AND UNITS OF MUTUAL FUNDS. WITH REGARD TO THE ARGUMENTS OF THE ASSESSEE THAT THE TRANSACTIONS OF THESE SHAR ES AND MUTUAL FUNDS HAVE BEEN CONSISTENTLY BEEN SHOWN IN THE BOOKS OF ACCOUNTS UN DER THE HEAD INVESTMENTS, THE LD AO OBSERVED THAT THE TREATMENT IN THE BOOKS BY AN A SSESSEE IS NOT CONCLUSIVE AND IF THE VOLUME, FREQUENCY AND REGULARITY AT WHICH TRANSACTI ONS ARE CARRIED OUT INDICATE SYSTEMATIC AND ORGANIZED ACTIVITY WITH PROFIT MOTIV E, THEN IT BECOMES BUSINESS PROFIT AND NOT CAPITAL GAIN. HE CONCLUDED BY STATING THA T THE ASSESSEE HAS BEEN DOING THIS ACTIVITY OF SHARES AND MUTUAL FUNDS CONTINUOUSLY FO R YEARS AND THE VOLUME CLEARLY REFLECTS THAT HE IS TRADING IN SHARES AND SECURITIE S AND IN NO WAY BE CALLED AS INVESTOR IN SHARES AND SECURITIES. THE MERE OBJECT IS NOT TO E ARN DIVIDEND INCOME BUT TO EARN INCOME BY UTILIZING HIS EXPERT KNOWLEDGE OF SHARE M ARKET AND THEN TO EARN PROFIT. A NORMAL MAN WOULD NOT BE DOING FREQUENTLY, SUCH VOLU MES WITHOUT HAVING EXPERTISE KNOWLEDGE. BASED ON THESE OBSERVATIONS, THE LD AO CONCLUDED THAT THE ACTIVITY OF INVESTMENT IN SHARES AND MUTUAL FUNDS TO BE A TRADI NG ACTIVITY AND HENCE THE RESULTANT GAIN THEREON WOULD BE TAXABLE AS BUSINESS INCOME OF THE ASSESSEE AS AGAINST THE CLAIM OF SHORT TERM CAPITAL GAINS BY THE ASSESSEE. HOWEV ER, IN RESPECT OF CLAIM OF EXEMPTION OF RS. 1,06,86,185/- U/S 10(38) OF THE ACT TOWARDS LTCG, THE LD AO ACCEPTED THE CLAIM OF THE ASSESSEE IN THE ASSESSMENT. ITA NOS.2800&2799/KOL/2013 DILIP B.DESAII (HUF). A.YR.2009-10 & 2006-07 4 6. BEFORE THE LD CITA, THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND BROUGHT TO THE ATTENTION OF THE LD CITA, THE FACTUAL ERROR COMMITTED BY THE LD AO WITH REGARD TO THE HOLDING PERIOD OF SHAR ES. THE ASSESSEE SUBMITTED THAT THE HOLDING PERIOD OF SHARES WAS WRONGLY STATED BY THE LD AO TO BE MAXIMUM IN THE RANGE OF 76 110 DAYS, WHEREAS FACTUALLY THE SUBSTANTIAL VOLUME OF SHARES WERE HELD FOR THE PERIOD 111 TO 356 DAYS WHICH DETAILS WERE ALSO VERY MUCH AVAILABLE BEFORE THE LD AO WHICH WAS IGNORED BY THE LD AO. IT WAS ALSO STATE D THAT IN MAJORITY OF CASES , THE PERIOD OF HOLDING WAS SUBSTANTIALLY HIGH AND ASSESS EE HAD EARNED SUBSTANTIAL AMOUNTS IN THE FORM OF DIVIDEND TO THE TUNE OF RS. 2.33 CRO RES. THIS GOES TO PROVE THAT THE ASSESSEE HAD WAITED FOR THE DECLARATION OF DIVIDEND BEFORE SELLING OF THE SHARES WHICH A NORMAL BUSINESS TRADER WOULD NOT DO. THE LD CIT A OBSERVED THAT THE TREATMENT GIVEN IN THE BOOKS CONSISTENTLY OVER THE YEARS WERE UNDER THE HEAD INVESTMENTS. THE LD CITA BY PLACING RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS H HOLCK LARSEN REPORTED IN (1986) 16 0 ITR 67 (SC) AND RAJPUTANA TEXTILES (AGENCIES) LTD VS CIT REPORTED IN (1961) 4 1 ITR 743 (SC) ACCEPTED THE CONTENTIONS OF THE ASSESSEE AND TREATED THE ASSESSE E AS AN INVESTOR OF SHARES. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON TH E FOLLOWING GROUNDS :- GROUND N0.1: 'THAT. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD, CIT (A) ERRED IN DIRECTING TO COMPUTE THE INCOME OF THE APP ELLANT UNDER THE HEAD INCOME FROM CAPITAL GAINS INSTEAD OF BUSINESS INCOME AS DETERMI NED BY THE ASSESSING OFFICER' GROUND. N0.2: 'THAT. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD, CIT(A) ERRED IN OVERLOOKING CBDT INSTRUCTION NO.4/2007 DATED 15.06. 2007, IGNORING VARIOUS DECISIONS OF HIGHER COURTS AND ALSO IGNORING THE FREQUENCY OF TRADE, LIMITED HOLDING PERIOD AND HUGE VOLUME OF TRANSACTIONS UNDERTAKEN BY THE ASSES SEE' GROUND NO.3: 'THAT. THE APPELLANT CRAVES LEAVE TO SUBMIT ADDITIO NAL GROUNDS OF APPEAL, IF ANY, AT OR BEFORE THE TIME OF HEARING AND /OR ALTER, MODIFY, R EFRAME ANY GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. ' 7. THE LD DR REITERATED THE FINDINGS OF THE LD AO. IN RESPONSE TO THIS, THE LD AR ARGUED THE FOLLOWING :- (A) THE SHARES AND MUTUAL FUNDS INVESTED BY THE ASS ESSEE WERE SHOWN UNDER THE HEAD INVESTMENTS IN THE BOOKS OF ACCOUNTS OF THE ASSES SEE REGULARLY OVER THE YEARS. THIS HAS NOT BEEN DISPUTED BY THE REVENUE IN THE EARLIER YEARS. ITA NOS.2800&2799/KOL/2013 DILIP B.DESAII (HUF). A.YR.2009-10 & 2006-07 5 (B) FROM THE PERUSAL OF THE BALANCE SHEETS OF EARLI ER YEARS AND DURING THE YEAR UNDER REVIEW, IT COULD BE SEEN THAT THE ASSESSEE NEVER HA D ANY BORROWINGS. (C ) THE ASSESSEE DOES NOT HAVE ANY STOCK IN TRADE WITH RESPECT TO SECURITIES AND MUTUAL FUNDS IN ITS BOOKS. (D) THE LD AO HAD ACCEPTED THE EXEMPTION U/S 10(38) FOR LONG TERM CAPITAL GAINS CLAIMED BY THE ASSESSEE AND HENCE TO THAT EXTENT, H E ACCEPTS TO THE FACT THAT THE ASSESSEE IS AN INVESTOR. BUT HIS FINDING IN THE AS SESSMENT ORDER GO TO PROVE THAT THE ASSESSEE HAD ONLY FULLY DEALT WITH THE SHARES AND M UTUAL FUNDS ONLY AS A TRADER AND NOT AS AN INVESTOR AT ALL. (E) ASSESSMENTS FOR THE ASST YEARS 2004-05 AND 2005 -06 WERE COMPLETED U/S 143(3) OF THE ACT VIDE ORDERS DATED 27.12.2006 AND 31.12.2 007 RESPECTIVELY WHEREIN THE ASSESSEES STAND AND STATUS AS AN INVESTOR IN SHARE S TOGETHER WITH THE OFFER OF CAPITAL GAINS HAS BEEN ACCEPTED BY THE REVENUE. (F) HE ARGUED THAT THERE WAS NO ANY STRANGE NEGATI VE DEVELOPMENT THAT HAD HAPPENED IN THE YEARS UNDER APPEAL WHICH WOULD PROBABLY LEAD THE LD AO TO ARRIVE AT A CONCLUSION THAT ASSESSSEE HAD SHIFTED FROM INVESTOR TO A TRADER. HENCE GOING BY THE PRINCIPLE OF CONSISTENCY, HE STATED THAT THE ASSESS EE SHOULD BE TREATED ONLY AS AN INVESTOR IN THE YEARS UNDER APPEAL ALSO. (G) HE FAIRLY STATED THAT THE ASSESSMENTS FOR THE A SST YEARS 2007-08 AND 2008-09 WERE COMPLETED U/S 143(1) OF THE ACT ,WHEREIN THE ASSESS EES STAND AS INVESTOR AND RESULTANT CAPITAL GAINS WERE ACCEPTED BY THE REVENUE. (H) HE ARGUED THAT THE ASSESSEE HAD RECEIVED DIVIDE ND ON SHARES AND MUTUAL FUNDS TO THE TUNE OF RS. 2,33,98,095/- WHICH IS VERY SUBSTAN TIAL , WHICH ITSELF GOES TO PROVE THAT THE ASSESSEE HAD INVESTED IN THE SHARES AND MUTUAL FUNDS WITH AN INTENTION TO EARN DIVIDEND INCOME AND NOT FOR THE PURPOSE OF TRADING. HE ALSO DREW THE ATTENTION OF THE BENCH TO THE DETAILS OF DIVIDEND RECEIVED FROM EACH OF THE SCRIPS AND MUTUAL FUNDS BY POINTING TO THE RELEVANT PAGE OF THE PAPER BOOK FIL ED BY THE ASSESSEE. HE BROUGHT THE ATTENTION OF THE BENCH TO THE FACTUA L ERROR COMMITTED BY THE LD AO IN WRONGLY MENTIONING THE PERIOD OF HOLDING TO 110 DAY S AS THE MAXIMUM PERIOD OF HOLDING WHEN FACTUALLY LARGE VOLUMES OF SHARES WERE HELD FOR AS LONG AS 356 DAYS ITA NOS.2800&2799/KOL/2013 DILIP B.DESAII (HUF). A.YR.2009-10 & 2006-07 6 WHICH IS QUITE EVIDENT FROM THE DETAILS OF SHORT TE RM CAPITAL GAINS TOGETHER WITH THE HOLDING PERIOD IN DAYS SUBMITTED BEFORE THE LD AO. HE ARGUED THAT THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS MERLIN HO LDING P LTD REPORTED IN (2015) 375 ITR 118 (CAL) FOR THE ASST YEARS 2005-06 AND 20 06-07 HAD HELD THAT SHORT TERM CAPITAL GAINS MEANS SHARES HELD AND SOLD WITHIN A P ERIOD OF 1 TO 365 DAYS. HE PLACED RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS GOPAL PUROHIT REPORTED IN (2011) 336 ITR 287 (BOM) IN SUPPORT OF HIS ARGUMENTS APART FROM RELYING ON THE CO-ORDINATE BENCH DECISION OF T HIS TRIBUNAL IN THE CASE OF ITO VS LYONS & ROSES PVT LTD IN ITA NOS. 1148 & 1437/KOL/ 2009 FOR ASST YEARS 2005-06 & 2006-07 DATED 20.1.2016 IN SUPPORT OF HIS ARGUMEN TS. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK OF THE ASSESSEE COM PRISING OF COMPUTATION OF TOTAL INCOME AND TAX THEREON (PAGES 1 TO 3 OF PB) ; STATE MENT OF ACCOUNTS AS ON 31.3.2006 ALONG WITH RELEVANT SCHEDULES (PAGES 4 TO 7 OF PB) ; ORDER U/S 143(3) OF THE ACT DATED 6.11.2008 FOR AY 2006-07 (PAGES 8 TO 9 OF PB) ; ORD ER U/S 263 OF THE ACT DATED 25.3.2011 FOR AY 2006-07 (PAGES 10 TO 14 OF PB) ; R ELEVANT EXTRACTS OF REPLY DATED 19.1.2011 FILED DURING PROCEEDINGS U/S 263 OF THE A CT ALONG WITH RELEVANT ANNEXURES (PAGES 15 TO 19 OF PB) AND RELEVANT EXTRACTS OF REP LY DATED 24.1.2011 FILED DURING PROCEEDINGS U/S 263 OF THE ACT (PAGES 20 TO 23 OF P B). APART FROM THIS, WE HAVE ALSO GONE THROUGH THE SCRUTINY ASSESSMENT ORDER U/S 143( 3) OF THE ACT TOGETHER WITH COMPUTATION OF TOTAL INCOME AND STATEMENT OF ACCOUN TS OF THE ASSESSEE WITH SCHEDULES FOR THE ASST YEARS 2004-05 AND 2005-06. WE FIND THAT ALL THE ARGUMENTS OF THE LD AR FIND LOT OF FORCE IN THE FACTS OF THE INSTANT CASE. WE FIND THAT THE SHARES BEFORE THE DATE OF ITS SALE WERE HELD FOR A PERIOD RANGING FROM 13 DAYS TO 356 DAYS AND TO THIS EXTENT THE FACTUAL INACCURACY ON THE PART OF THE LD AO ON THE HOLDING PERIOD OF SHARES IS NOT APPRECIATED. WE FIND THAT THE LD AO HAD TREATED T HE ASSESSEE AS AN INVESTOR TO THE EXTENT OF LONG TERM CAPITAL GAINS DECLARED BY THE ASSESSEE AND CLAIM OF EXEMPTION U/S 10(38) HAS ALSO BEEN GRANTED BY THE ASSESSEE. IT I S NEVER THE CASE OF THE LD AO THAT THE ASSESSEE WAS ENGAGED IN DUAL PORTFOLIO I.E ONE HELD FOR TRADING AND OTHER HELD FOR INVESTMENTS. ACCORDING TO THE LD AO, THE ASSESSEE WAS ONLY TRADING IN SHARES FOR ITA NOS.2800&2799/KOL/2013 DILIP B.DESAII (HUF). A.YR.2009-10 & 2006-07 7 WHICH HE HAD ARRIVED AT VARIOUS JUSTIFICATIONS SUCH AS ASSESSEE HAS BEEN DOING THIS ACTIVITY OF SHARES AND MUTUAL FUNDS CONTINUOUSLY FO R YEARS AND THE VOLUME CLEARLY REFLECTS THAT HE IS TRADING IN SHARES AND SECURITIE S AND IN NO WAY BE CALLED AS INVESTOR IN SHARES AND SECURITIES. THE MERE OBJECT IS NOT T O EARN DIVIDEND INCOME BUT TO EARN INCOME BY UTILIZING HIS EXPERT KNOWLEDGE OF SHARE M ARKET AND THEN TO EARN PROFIT. A NORMAL MAN WOULD NOT BE DOING FREQUENTLY, SUCH VOLU MES WITHOUT HAVING EXPERTISE KNOWLEDGE . HENCE IT COULD BE SAFELY CONCLUDED THAT THE LD AO NEVER INDICATED THAT THE ASSESSEE WAS HAVING DUAL PORTFOLIO OF SHARES AN D MUTUAL FUNDS. 8.1. WE FIND THAT THE LD AO HAVING ACCEPTED THE CL AIM OF EXEMPTION U/S 10(38) OF THE ACT FOR LONG TERM CAPITAL GAINS OF THE ASSESSEE HAD CONCEDED THE CLAIM OF ASSESSEE TO BE AN INVESTOR AND THE LD AO CANNOT TAKE A DIFFEREN T STAND BY TREATING THE ASSESSEE AS A TRADER IN RESPECT OF SHORT TERM CAPITAL GAINS ALONE . 8.2. WE FIND THAT THE ASSESSEE HAD EARNED DIVIDEND INCOME TO THE TUNE OF RS. 2,33,98,095/- WHICH IS VERY SUBSTANTIAL INDICATING THE ASSESSEES INTENTION TO ALWAYS REMAIN AS AN INVESTOR AND NOT TO EXIT THE SCRIP WIT H A SHORT TERM PROFIT MOTIVE. 8.3. WE ALSO FIND THAT THE ASSESSEE HAD BEEN CONSIS TENTLY SHOWING THE AMOUNT INVESTED IN SHARES AND MUTUAL FUNDS UNDER THE HEAD INVESTME NTS IN ITS BOOKS OF ACCOUNTS AND THERE ARE NO BORROWINGS IN THE BALANCE SHEET FILED BY THE ASSESSEE FOR THE EARLIER YEARS. THESE FACTS ARE NOT CONTROVERTED BY THE REVENUE BEF ORE US. WE FIND THAT THE REVENUE HAD ALREADY ACCEPTED THE ASSESSEE TO BE AN INVESTOR IN THE EARLIER YEARS EVEN IN THE SCRUTINY ASSESSMENTS FRAMED U/S 143(3) OF THE ACT F OR THE ASST YEARS 2004-05 AND 2005-06. THOUGH THE PRINCIPLE OF RESJUDICATA IS NO T APPLICABLE IN INCOME TAX PROCEEDINGS, THE PRINCIPLE OF CONSISTENCY CANNOT BE GIVEN A GOBY IN THE ABSENCE OF ANY CHANGED CIRCUMSTANCES. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF RADHASAOMI SAT SANG REPORTED IN 193 ITR 321 (SC). WE FIND THAT THE RELIANCE PLACED ON THE VARI OUS DECISIONS BY THE LD AR ARE VERY WELL FOUNDED. FOR THE SAKE OF BREVITY, WE WOULD LI KE TO CONFINE OUR DISCUSSIONS ONLY ON THE ORDER OF CO-ORDINATE BENCH OF THIS TRIBUNAL WHICH HAD DEALT THE OTHER DECISIONS ITA NOS.2800&2799/KOL/2013 DILIP B.DESAII (HUF). A.YR.2009-10 & 2006-07 8 ALSO RELIED UPON BY THE LD AR, WHEREIN ONE OF THE M EMBER WAS ALSO A PARTY TO THAT ORDER, IT WAS HELD THAT :- 5.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIALS AVAILABLE ON RECORD INCLUDING THE DETAILED PAPER BOOK FILED BY T HE ASSESSEE CONTAINING THE SCRUTINY ASSESSMENT ORDERS OF THE ASSESSEE FOR THE ASST YEAR S 2002-03, 2004-05, 2008-09 & 2010-11 ; STATEMENT OF TOTAL INCOME FOR THE ASST YE AR 2010-11 ; AUDITED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31.3.2004 & 31.3.200 5 ; DETAILS OF PROFIT ON SALE OF INVESTMENTS ; DETAILS OF INVESTMENTS AND STOCK IN T RADE FOR FIVE YEARS AND COMPILATION OF VARIOUS CASE LAWS ON THE IMPUGNED ISSUE. WE FIND THAT THE ASSESSEE IS ENGAGED IN INVESTMENT ACTIVITY AND BUSINESS ACTIVITY FOR YEARS TOGETHER. WE ALSO FIND THAT THE CO- ORDINATE BENCH DECISION OF THIS TRIBUNAL FOR THE AS ST YEAR 1992-93 IN ASSESSEE'S OWN CASE IN ITA NO. 2943/CAL/1996 DATED 28.9.2001 HAD A CCEPTED THE PLEA OF THE ASSESSEE THAT THE GAINS ARISING OUT OF INVESTMENT ACTIVITIES OF THE ASSESSEE HAD TO BE ASSESSED ONLY AS CAPITAL GAINS AND NOT BUSINESS INCOME. IT I S ALSO NOT IN DISPUTE THAT THE REVENUE HAS BEEN ACCEPTING THE DUAL PORTFOLIO MAINT AINED BY THE ASSESSEE FOR YEARS TOGETHER WHICH IS QUITE EVIDENT FROM THE SCRUTINY A SSESSMENT ORDERS PASSED BY THE LEARNED AO FOR THE ASST YEARS 2002-03, 2004-05, 200 8-09 AND 2010-11, WHEREIN THE STAND OF THE ASSESSEE REPORTING BOTH CAPITAL GAINS AND BUSINESS INCOME ARISING OUT OF PURCHASE AND SALE OF SHARES HAVE BEEN ACCEPTED. HEN CE WE FIND LOT OF FORCE IN THE DECISION OF THE HON'BLE APEX COURT RELIED ON BY THE LEARNED AR IN THE CASE OF RADHASOAMI SATSANG (SUPRA) ON THE PRINCIPLE OF CONS ISTENCY. WE ARE ALSO IN AGREEMENT WITH THE ARGUMENTS OF THE LEARNED AR THAT JUST BECAUSE THE ASSESSEE HAD MADE PROFITS OUT OF ITS INVESTMENT ACTIVITIES, THE SAME CANNOT BE CONCLUDED THAT THE ASSESSEE HAD CARRIED ON WITH AN INTENTION TO DO BUS INESS. FOR THAT MATTER, EVERY ASSESSEE WOULD ONLY TRY TO MAKE PROFITS OUT OF THEI R ACTIVITIES BE IT INVESTMENT OR BUSINESS. WHAT IS TO BE SEEN IS WHETHER THE ASSESSE E INTENDED TO MAKE ONLY PROFITS FROM DEALING IN SHARES OR WHETHER THE SHARES WERE P URCHASED WITH A VIEW TO EARN DIVIDEND INCOME WHICH IS ALSO PROFIT. THE GAINS ARI SING IN THE FORMER CASE WOULD BE IN THE NATURE OF TRADE AND HENCE BUSINESS INCOME AND T HE LATTER WOULD BE FOR THE PURPOSE OF INVESTMENT AND HENCE RESULTANT GAIN WOULD BE CAP ITAL GAINS. IN THE INSTANT CASE, THE ASSESSEE HAD REPORTED BOTH DIVIDEND INCOME AND OFFE RED SHORT TERM AND LONG TERM CAPITAL GAINS ON THE INVESTMENT ACTIVITIES AND BUSI NESS INCOME FOR TRADING ACTIVITIES. 5.3.1 WHETHER INTRODUCTION OF CONCESSIONAL RATE OF TAX O N SHORT TERM CAPITAL GAINS AND EXEMPTION OF LONG TERM CAPITAL GAINS PURSUANT TO IN TRODUCTION OF SECURITIES TRANSACTION TAX (STT) WOULD CHANGE THE CHARACTER OF THE TRANSACTION WE FIND THAT THE ENTIRE GAMUT OF TRANSACTIONS ARE T O BE VIEWED IN THE CONTEXT OF DOMINANT INTENTION OF THE ASSESSEE WHETHER TO HOLD A PARTICULAR SCRIP IN INVESTMENT PORTFOLIO OR IN TRADING PORTFOLIO. WE FIND THAT THE LEVY OF SECURITIES TRANSACTION TAX HAS BEEN INTRODUCED IN THE STATUTE WITH EFFECT FROM 1 ST OCTOBER 2004 RELEVANT TO ASST YEAR 2005-06, WHEREIN IF A SALE OF SHARES TRANSACTION IS ROUTED THROUGH A RECOGNIZED STOCK EXCHANGE AND SECURITIES TRANSACTION TAX IS SUFFERED BY THE ASSESSEE, THEN THE LONG TERM CAPITAL GAINS ARISING ON SUCH SALE WOULD BE EXEMPT U/S 10(38) OF THE ACT. SIMILARLY WITH EFFECT FROM 1.4.2005, THE SHORT TERM CAPITAL G AINS, IF SUBJECTED TO LEVY OF SECURITIES TRANSACTION TAX, WOULD BE LIABLE FOR CON CESSIONAL RATE OF TAX AS AGAINST THE NORMAL RATE OF TAX @ 30%. WE ALSO FIND THAT THE LEA RNED AO HAD NOT BROUGHT ANY EVIDENCE ON RECORD THAT THE ASSESSEE WAS TRYING TO SHIFT ANY OF ITS TRADING ASSETS FROM THE TRADING PORTFOLIO OF SHARES & UNITS TO THE INVE STMENT PORTFOLIO TO TAKE ADVANTAGE OF ITA NOS.2800&2799/KOL/2013 DILIP B.DESAII (HUF). A.YR.2009-10 & 2006-07 9 LOWER TAX RATES UNDER THE HEAD CAPITAL GAINS AND VI CE VERSA WHEREVER LOSSES WERE INCURRED ON SALE OF INVESTMENTS. IT IS NOT IN DISPU TE THAT THE ASSESSEE HAD NOT CONVERTED ANY OF THE SHARES UNDER INVESTMENT CATEGORY INTO ST OCK IN TRADE. 5.3.1.1 AS STATED SUPRA WE FIND THAT CERTAIN SHARES UNDER INVESTMENT PORTFOLIO WERE HELD BY THE ASSESSEE FROM THE YEAR 1995 ONWARDS. JU ST BECAUSE IF DURING THE MID OF THE RELEVANT FINANCIAL YEAR, CERTAIN TAX BENEFITS H AVE BEEN GIVEN IN RESPECT OF CAPITAL GAINS, THAT CANNOT, IN ANY WAY, LEAD TO AN ASSUMPTI ON OR PRESUMPTION THAT THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE O F SHARES WAS THAT OF A TRADER AND NOT OF AN INVESTOR. THE TREATMENT OF THE INVESTMENT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE IS ALSO A RELEVANT GUIDING FACTOR. THE ISS UE OF TREATMENT OF INCOME FROM SHARE TRANSACTION AS SHORT TERM CAPITAL GAINS OR BUSINESS INCOME HAS IN FACT ARISEN AFTER THE AMENDMENT BROUGHT WITH FINANCE ACT 2004 WITH EFFECT FROM 1.10.2004. IT IS AN ADMITTED FACT ON RECORD THAT PRIOR TO AMENDMENT WHE N THE TAX ON SHORT TERM CAPITAL GAINS WAS AT PAR WITH BUSINESS INCOME, THE DEPARTME NT HAS BEEN CONSISTENTLY ACCEPTING THE TREATMENT OF INCOME BY THE ASSESSEE A S CAPITAL GAINS. MERELY BECAUSE THE RATE OF TAX HAS BEEN REDUCED IN RESPECT OF SHOR T TERM CAPITAL GAINS AND LONG TERM CAPITAL GAINS HAVE BEEN MADE EXEMPT DURING THE YEAR BY WAY OF AN AMENDMENT TO THE PROVISIONS, THAT ITSELF, CANNOT BE A GROUND FOR THE LEARNED AO TO DEPART FROM ITS CONSISTENT STAND OF TREATING THE ASSESSEE AS AN INV ESTOR AND THEREBY TO CHARGE THE INCOME EARNED BY THE ASSESSEE FROM SHARE TRANSACTIO NS AS BUSINESS INCOME. FROM THE RECORDS, IT IS FOUND THAT AT THE TIME OF PURCHASE A ND SALES EVEN DURING THE PERIOD PRIOR TO 1.10.2004, THE ASSESSEE WAS NOT GUIDED OR INFLUE NCED BY LOWER TAX RATE IN CASE OF SHORT TERM CAPITAL GAINS AS THE RATE FOR BUSINESS I NCOME AND SHORT TERM CAPITAL GAINS WAS AT PAR. THE ASSESSEE, HOWEVER, WAS TREATING HIM SELF AS AN INVESTOR AND KEEPING THE DELIVERY BASED SHARES AS INVESTMENTS IN HIS ACC OUNT IRRESPECTIVE OF THE PROBABLE TAX IMPLICATION AS THERE WERE NO SUCH TAX IMPLICATI ONS AS DISCUSSED ABOVE. THUS, THE INTENTION OF THE ASSESSEE, WHILE PURCHASING THE SHA RE, IS THE IMPORTANT AND GUIDING FACTOR AS TO WHETHER THE SAME WAS PURCHASED WITH AN INTENTION OF INVESTMENT OR TRADING. 5.3.2 DUAL PORTFOLIO - WHETHER PERMITTED WE ALSO FIND THAT NOTHING PROHIBITS AN ASSESSEE FRO M HOLDING DUAL PORTFOLIOS I.E. (1) SHARES/UNITS HELD FOR INVESTMENT AND (2) SHARES/UNI TS HELD FOR TRADING PURPOSES. IT IS NOT IN DISPUTE THAT IN THE INSTANT CASE, THE ASSESS EE HAD MAINTAINED DUAL PORTFOLIOS IN ITS BOOKS OF ACCOUNTS AND HAD REPORTED CAPITAL GAIN S AND BUSINESS INCOME SEPARATELY AS PER THE CONSISTENT PRACTICE FOLLOWED BY THE ASSE SSEE OVER THE YEARS AND ACCEPTED BY THE REVENUE IN THE EARLIER YEARS. IT IS WELL SETTLE D THAT IT IS FOR THE ASSESSEE TO ADDUCE EVIDENCE TO SHOW THAT HIS HOLDING IS FOR INVESTMENT OR FOR TRADING AND WHAT DISTINCTION HE HAS KEPT IN THE RECORDS OR OTHERWISE, BETWEEN TW O TYPES OF HOLDINGS. IF THE ASSESSEE IS ABLE TO DISCHARGE THE PRIMARY ONUS AND COULD PRI MA FACIE SHOW THAT PARTICULAR ITEM IS HELD AS INVESTMENT OR STOCK IN TRADE, THEN ONUS WOULD SHIFT TO REVENUE TO PROVE THAT APPARENT IS NOT REAL. IN THE INSTANT CASE, WE FIND FROM THE DETAILS IN THE PAPER BOOK THAT THE ASSESSEE HAD DULY DISCHARGED ITS PRIMARY O NUS OF DEMARCATING THE SCRIPTS HELD FOR INVESTMENT AND FOR TRADING AND THE RESULTANT GA INS DERIVED THEREFROM. EVEN THE CBDT CIRCULAR NO. 4 OF 2007 DATED 15.6.2007 ENVISAGES THE PRACTICE OF ASSESSEE'S MAINTAINING DUAL PORTFOLIOS. WE ALSO FIN D THAT THE DECISION WAS RENDERED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. GOPAL PUROHIT [2011] 336 ITR 287/[2010] 188 TAXMAN 140 WHEREIN THE ASSESSEE HAD MAINTAINED DUAL PORTFOLIOS AND ULTIMATELY THE COURT HELD THAT THE RESULTANT GAINS FROM INVESTMENT ACTIVITY WOULD BE ITA NOS.2800&2799/KOL/2013 DILIP B.DESAII (HUF). A.YR.2009-10 & 2006-07 10 ASSESSABLE AS CAPITAL GAINS AND NOT BUSINESS INCOME . WE ALSO FIND THAT THE VALUATION OF INVESTMENTS HAS BEEN DONE BY THE ASSESSEE AT COS T AS COULD BE EVIDENT FROM THE ACCOUNTING POLICIES FORMING PART OF THE AUDITED FIN ANCIAL STATEMENTS. 5.3.2.1 WE ALSO FIND THAT THE CBDT IN ITS INSTRUCTION NO. 1827 DATED 31.8.1989 HAS LAID DOWN CERTAIN CRITERIA TO DETERMINE WHETHER AN ACTIVITY OF PURCHASE AND SALE OF SHARES IS IN THE NATURE OF TRADING ACTIVITY OR I NVESTMENT ACTIVITY. ONE OF THE CRITERIA LAID DOWN IS THE TREATMENT GIVEN IN THE BOOKS IS IN DICATIVE OF ASSESSEE'S INTENTION WHETHER TO HOLD THE SHARES WITH A VIEW TO EARN DIVI DEND AND LONG TERM APPRECIATION OR WITH A VIEW TO CARRYING ON AS BUSINESS. 5.3.3 INTENTION OF THE ASSESSEE WE FIND THE INTENTION OF THE ASSESSEE TO MAINTAIN T WO INDEPENDENT PORTFOLIOS I.E. ONE FOR INVESTMENT PURPOSES AND ONE FOR TRADING PURPOSE S FROM THE VERY BEGINNING IS QUITE EVIDENT FROM THE BOOKS OF ACCOUNTS WHEREIN ASSESSEE HAD SEPARATE ENTRIES IN ITS LEDGER ACCOUNTS AT THE TIME OF EACH TRANSACTION I.E. AT TH E TIME OF PURCHASE ITSELF. THIS PRACTICE HAS NOT BEEN FOUND FAULT BY THE REVENUE IN THE EARLIER ASSESSMENT YEARS EVEN IN SCRUTINY PROCEEDINGS. THE HON'BLE MADRAS HIGH CO URT IN THE CASE OF CIT V. S. RAMMAAMIRTHAN [2008] 217 CTR 206 WHILE DISTINGUISHING TRADING AND INVESTMENT, OBSERVED THAT THE INTENTION OF THE ASSESSEE IS RELE VANT TO DETERMINE WHETHER AN ASSESSEE IS CARRYING ON THE BUSINESS IN SHARES OR I NVESTMENTS. THE INITIAL INTENTION OF THE ASSESSEE IN THE INSTANT CASE IS PROVED BEYOND D OUBT FROM THE MANNER OF MAINTAINING TWO SEPARATE PORTFOLIOS I.E. (1) FOR IN VESTMENT PURPOSES AND (2) FOR TRADING PURPOSES. THE LEARNED AR ARGUED THAT IN RES PECT OF SHARES RETAINED UNDER 'INVESTMENT CATEGORY' THE ASSESSEE HAD TAKEN DUE DE LIVERY OF SHARES ON ITS PURCHASE AND GIVEN DUE DELIVERY OF SHARES ON ITS SALE. THE L EARNED AR FURTHER INFORMED THAT THE ASSESSEE HAD ALSO KEPT SEPARATE RECORDS TO RECORD T HE TRANSACTIONS OF EACH CATEGORY I.E DELIVERY BASED AND NON- DELIVERY BASED. IT IS S ETTLED LAW THAT A PARTICULAR INCOME IS FROM BUSINESS OR FROM INVESTMENT MUST BE DECIDED AC CORDING TO THE GENERAL COMMON SENSE VIEW OF THOSE WHO DEAL WITH THOSE MATTERS IN THE PARTICULAR CIRCUMSTANCES. THE MOST EXCRUCIATING FACTOR TO BE LOOKED INTO AT THIS JUNCTURE IS THE CONDUCT OF THE ASSESSEE. 5.3.4 FREQUENCY OF TRANSACTIONS THE NEXT POINT TO BE ADDRESSED IN THIS ISSUE IS WHE THER THE FREQUENCY OF TRANSACTIONS WOULD ALONE INDICATE THE TRADING ACTIVITY. IN THIS REGARD, WE FIND THE CO-ORDINATE BENCH OF MUMBAI TRIBUNAL HAD AN OCCASION TO CONSIDE R THE SAME IN THE CASE OF JANAK S. RANGWALLA V. ASSTT. CIT [2007] 11 SOT 627 (MUM) , WHEREIN IT WAS HELD THAT: 'IT IS THE INTENTION OF THE ASSESSEE WHICH IS TO BE SEEN TO DETERMINE THE NATURE OF TRANSACTION CONDUCTED BY THE ASSESSEE. THOUGH THE I NVESTMENT IN SHARES IS ON A LARGE MAGNITUDE BUT THE SAME SHALL NOT DECIDE THE N ATURE OF TRANSACTION. SIMILAR TRANSACTIONS OF SALE AND PURCHASE OF SHARES IN THE PRECEDING YEARS HAVE BEEN HELD TO BE INCOME FROM CAPITAL GAINS BOTH ON LONG T ERM AND SHORT TERM BASIS. THE TRANSACTION IN THE YEAR UNDER CONSIDERATION ON ACCO UNT OF SALE AND PURCHASE OF SHARES IS SAME AS IN THE PRECEDING YEARS AND THE SA ME MERITS TO BE ACCEPTED AS SHORT TERM CAPITAL GAINS. THERE IS NO BASIS FOR TRE ATING THE ASSESSEE AS A TRADER IN SHARES, WHEN HIS INTENTION TO HOLD THE SHAES IN IND IAN COMPANIES AS AN INVESTMENT AND NOT AS STOCK IN TRADE. THE MERE MAGN ITUDE OF THE TRANSACTION DOES NOT CHANGE THE NATURE OF TRANSACTION, WHICH ARE BEI NG ASSESSED AS INCOME FROM ITA NOS.2800&2799/KOL/2013 DILIP B.DESAII (HUF). A.YR.2009-10 & 2006-07 11 CAPITAL GAINS IN THE PAST SEVERAL YEARS. THE ASSESS ING OFFICER IS DIRECTED TO SET OFF THE LONG TERM CAPITAL LOSS AGAINST THE SHORT TERM C APITAL GAIN OF THE YEAR UNDER CONSIDERATION. THE GROUNDS OF APPEAL RAISED B Y THE ASSESSEE ARE ALLOWED.' 5.3.4.1 WE ALSO FIND THAT THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. MERLIN HOLDING (P.) LTD. [2015] 375 ITR 118/[2016] 65 TAXMANN.COM 37 FOR THE ASST YEARS 2005- 06 AND 2006-07 HAD HELD AS BELOW: 'THE FREQUENCY OF TRANSACTIONS IN SHARES ALONE CANN OT SHOW THAT THE INTENTION OF THE INVESTOR WAS NOT TO MAKE AN INVESTMENT. THE LEG ISLATURE HAS NOT MADE ANY DISTINCTION ON THE BASIS-OF FREQUENCY OF TRANSACTIO NS. THE BENEFIT OF SHORT -TERM CAPITAL GAINS CAN BE AVAILED OF FOR ANY PERIOD OF R ETENTION OF SHARES UP TO 12 MONTHS. ALTHOUGH A CEILING HAS BEEN PROVIDED, THERE IS NO INDICATION AS REGARDS THE FLOOR, WHICH CAN BE AS LITTLE AS ONE DAY. THE Q UESTION ESSENTIALLY IS A QUESTION OF FACT. THE ASSESSEE WAS A CERTIFIED NON-BANKING FINANCIAL CONCERN. ITS MAIN ACTIVITIES WERE GIVING LOANS AND TAKING LOANS AND-INVESTING IN SHARES AND SECURITIES. THE ASSESSING OFFICER, FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07, OPINED THAT THE ACTIVITY WHICH, ACCORDING TO THE ASSESSEE, WAS ON I NVESTMENT ACCOUNT AMOUNTED TO BUSINESS ACTIVITY AND, THEREFORE, HE TREATED THE SHORT-TERM CAPITAL GAINS OF RS. 1,01,00,000 AS BUSINESS INCOME. THE COMMISSIONER (A PPEALS) HELD THAT THE REFUSAL ON THE PART OF THE ASSESSING OFFICER TO ACC EPT THE SHORT-TERM CAPITAL GAINS WAS INCORRECT. THIS WAS CONFIRMED BY THE TRIBUNAL. ON APPEAL : HELD, DISMISSING THE APPEAL, THAT THE ASSESSEE HAD ADDUCED PROOF TO SHOW THAT SOME TRANSACTIONS WERE INTENDED TO BE BUSINESS TRAN SACTIONS, SOME TRANSACTIONS WERE INTENDED TO BE BY WAY OF INVESTMENT AND SOME T RANSACTIONS WERE BY WAY OF SPECULATION. THE REVENUE HAD NOT BEEN ABLE TO FIND FAULT FROM THE EVIDENCE ADDUCED. THE MERE FACT THAT THERE WERE 1,000 TRANSA CTIONS IN A YEAR OR THE MERE FACT THAT THE MAJORITY OF THE INCOME WAS FROM THE S HARE DEALING OR THAT THE MANAGING DIRECTOR OF THE ASSESSEE WAS ALSO A MANAGI NG DIRECTOR OF A FIRM OF SHARE BROKERS COULD NOT HAVE ANY DECISIVE VALUE. TH E COMMISSIONER (APPEALS) AND THE TRIBUNAL HAD CONCURRENTLY HELD AGAINST THE VIEWS OF THE ASSESSING OFFICER. ON THE BASIS OF THE SUBMISSIONS MADE ON BE HALF OF THE REVENUE, IT WAS NOT POSSIBLE TO SAY THAT THE VIEW ENTERTAINED BY TH E COMMISSIONER (APPEALS) OR THE TRIBUNAL WAS NOT A POSSIBLE VIEW. THEREFORE, TH E DECISION OF THE TRIBUNAL COULD NOT BE SAID TO BE PERVERSE. NO FRUITFUL PURPO SE WAS LIKELY TO BE SERVED BY REMANDING THE MATTER.' 5.3.4.2 WE ALSO FIND THAT THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. H K FINANCIERS (P.) LTD. [2015] 61 TAXMANN.COM 175/234 TAXMAN 43 (CAL) FOR THE ASST YEAR 2007-08 HAD HELD AS BELOW:- '3. THE ASSESSING OFFICER HAS LAID STRESS ON MOTIVE . TO BEGIN WITH MOTIVE IS SOMETHING, WHICH IS LOCKED IN THE MIND OF THE PERSO N. NO DIRECT EVIDENCE AS REGARDS MOTIVE IS POSSIBLE. MOTIVE CAN BE INFERRED FROM THE CONDUCT OF THE PERSON CONCERNED BUT THAT IS BOUND TO REMAIN AN INFERENCE, WHICH MAY OR MAY NOT BE CORRECT. WE HAVE TODAY DICTATED A JUDGMENT IN THE C ASE OF CIT V. MERLIN HOLDING (P.) LTD. [IT APPEAL NO. 101 OF 2011, DATED 12-5- 2 015] WHEREIN THE FOLLOWING VIEWS HAVE BEEN EXPRESSED BY US: ITA NOS.2800&2799/KOL/2013 DILIP B.DESAII (HUF). A.YR.2009-10 & 2006-07 12 'FROM THE TENOR OF THE SUBMISSIONS MADE BY MR. SARA F NOTED ABOVE, IT APPEARS THAT THE CASE OF THE REVENUE IS THAT IN THE FACTS O F THE CASE THE FINDING THAT THE INCOME WAS EARNED FROM INVESTMENT COULD NOT HAVE BE EN RECORDED. IF THAT IS THE PROPOSITION THEN IT IS FOR THE REVENUE TO SHOW THAT SUCH A FINDING IS NOT POSSIBLE IN LAW. THAT WAS NOT EVEN SUGGESTED. WHAT REMAINS THEN IS A QUESTION OF APPRECIATION OF EVIDENCE, WHICH HAS ALREADY BEEN DO NE. NO FRUITFUL PURPOSE IS LIKELY TO BE SERVED BY REMANDING THE MATTER. WE DO NOT FIND ANY ISSUE, WHICH HAS REMAINED UNATTENDED. FOR THE AFORESAID REASONS, WE HOLD THAT THE JUDGMENT UNDER CHALLENGE IS NOT PERVERSE.' 4. THE JUDGMENT IN THE CASE OF DALHOUSIE INVESTMENT TRUST CO. LTD. V. CIT [1968] 68 ITR 486 (SC) REFERRED BY THE ASSESSING OFFICER DOES NOT ASSIST THE REVENUE BECAUSE IN THAT ON APPRECIATION OF FACTS IT WAS FOU ND AS FOLLOWS: 'ON THE FACTS, THAT THE APPELLANT DEALT WITH THE SH ARES OF MCLEOD AND CO. AND THE ALLIED COMPANIES AS STOCK-IN-TRADE, THAT THEY WERE IN FACT PURCHASED EVEN INITIALLY NOT AS INVESTMENTS BUT FOR THE PURPOSE OF SALE AT A PROFIT AND THEREFORE THE TRANSACTIONS AMOUNTED TO AN ADVENTURE IN THE NATURE OF TRADE. THE PROFIT DERIVED BY THE APPELLANT FROM THE SALE OF SHARES WAS THEREF ORE A REVENUE RECEIPT AND AS SUCH LIABLE TO INCOME-TAX.' 5. THE FACTS OF THE CASE ARE NOT SHOWN TO BE SIMILA R WITH THOSE IN THE CASE OF DALHOUSIE INVESTMENT. 6. FOR THE AFORESAID REASONS, WE ARE OF THE OPINION THAT THE VIEWS EXPRESSED BOTH BY THE CIT AND THE TRIBUNAL FOR REASONS EXPRESSED T HEREIN ARE A POSSIBLE VIEW. IT IS, THEREFORE, NOT OPEN TO THE REVENUE TO CONTEND T HAT THE VIEW TAKEN BY THE TRIBUNAL IS PERVERSE. QUESTION FORM ULATED AT THE T IME OF ADMISSION OF THE APPEAL DOES NOT APPEAR TO HAVE BEEN CORRECTLY FORMULATED. THE QUESTION COULD ONLY BE, WHETHER THE VIEWS EXPRESSED UPON APPRECIATING THE F ACTS AND CIRCUMSTANCES OF THE CASE WERE PERVERSE. THE QUESTION IS NOW FORMULA TED AND IS ANSWERED IN THE NEGATIVE. THE APPEAL IS THUS DISMISSED.' 5.3.5 EXISTENCE OF BORROWED FUNDS THE NEXT POINT TO BE ADDRESSED IN THIS ISSUE IS THE EXISTENCE OF BORROWED FUNDS AND PAYMENT OF INTEREST THEREON BY THE ASSESSEE. THE LE ARNED CIT(A) HAD GIVEN A FACTUAL FINDING THAT NO NEXUS HAS BEEN BROUGHT ON RECORD BE TWEEN THE BORROWED FUNDS AND THE INVESTMENTS MADE. THE LEARNED CIT(A) FOUND THAT FOR THE ASST YEAR 2005-06, THE ASSESSEE HAD MADE SHORT TERM BORROWINGS FROM ITS DI RECTOR FOR A PERIOD OF SEVEN MONTHS ONLY IN ORDER TO MEET ITS WORKING CAPITAL RE QUIREMENTS AND THE SAID LOAN WAS ALSO SQUARED UP DURING THE YEAR. SIMILARLY IN ASST YEAR 2006-07, THE ASSESSEE HAD MADE BORROWINGS OF RS. 3 CRORES AND UTILIZED THE SA ME FOR INVESTMENT AS WELL AS FOR TRADING ACTIVITY. THE LEARNED CIT(A) ALSO FOUND THA T THE ASSESSEE HAS GOT A SHARE CAPITAL OF RS. 10,00,000/- AND RESERVES AND SURPLUS AS ON 31.3.2005 AT RS. 1,73,98,009/- IN ADDITION TO GENERATION OF OWN FUND S IN THE FORM OF SALE OF SHARES HELD AS INVESTMENTS. THIS GOES TO PROVE THAT THE OWN FUN DS ALONG WITH BORROWED FUNDS HAVE BEEN UTILISED FOR BOTH INVESTMENT AND TRADING ACTIV ITIES OF THE ASSESSEE. HE ACCORDINGLY HELD THAT THE FINDING OF THE LEARNED AO THAT BORROWED FUNDS WERE UTILIZED FOR INVESTMENTS TO BE FACTUALLY INCORRECT. THIS FIN DING GIVEN BY THE LEARNED CIT(A) IS NOT REFUTED BY THE LEARNED DR BEFORE US FOR BOTH TH E ASST YEARS UNDER APPEAL. ITA NOS.2800&2799/KOL/2013 DILIP B.DESAII (HUF). A.YR.2009-10 & 2006-07 13 WE FIND THAT THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF JT. CIT V. BAJRANGLAL CHOWDHURY [2015] 58 TAXMANN.COM 204/232 TAXMAN 246 HAD HELD AS BELOW: 1. THE APPEAL IS DIRECTED AGAINST A JUDGMENT AND ORDER DATED MA RCH 13, 2014, BY WHICH THE LEARNED INCOME-TAX APPELLATE TRIBUNAL DISMISSED AN APPEAL PREFERRED BY THE REVENUE. 2. THE ASSESSING OFFICER HELD THAT THE TRANSACTION IN SHARES UNDERTAKEN BY THE ASSESSEE WAS IN THE NATURE OF A BUSINESS TRANSACTION AND NOT IN VESTMENT. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, AN APPEAL WAS PREFE RRED BY THE ASSESSEE WHICH WAS ALLOWED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) HOLDING THAT THE TRANSACTION WAS REALLY IN THE NATURE OF AN INVESTMENT. THE APPE LLATE AUTHORITY DISCUSSED REASONS AS TO WHY WAS THE TRANSACTION IN THE NATURE OF AN I NVESTMENT. THE REVENUE PREFERRED AN APPEAL. THE LEARNED TRIBUNAL AGREEING WITH THE A PPELLATE AUTHORITY DISMISSED THE APPEAL. THE REVENUE HAS ONCE AGAIN COME UP IN APPEA L BEFORE US. 3. MR. SARAF, LEARNED ADVOCATE APPEARING FOR THE REVENUE, STRENUOUSLY SUBMITTED THAT THE FINDING OF THE LEARNED TRIBUNAL IS PERVERSE. TH E TRIBUNAL IGNORED THE FACT THAT THE SHARES ALLEGEDLY PURCHASED IN JULY WERE NOT TAKEN D ELIVERY OF TILL DECEMBER NOR WAS ANY PAYMENT MADE WHEN THE PURCHASE WAS ALLEGEDLY MA DE IN THE MONTH OF JULY. THIS SUBMISSION OF MR. SARAF EVIDENTLY IS BASED ON MISRE ADING OF THE EVIDENCE. IT WOULD APPEAR FROM THE ASSESSMENT ORDER THAT PAYMENT WAS M ADE FOR THE SHARES IN THE MONTH OF JULY ITSELF THROUGH BILL ACCOMMODATION FACILITY. 4. MR. SARAF RELIED UPON A JUDGMENT IN THE CASE O F CIT V. SUTLEJ COTTON MILLS SUPPLY AGENCY LTD. [1975] 100 ITR 706 (SC) . HE DREW OUR ATTENTION TO THE FOLLOWING FINDING RECORDED BY THE APEX COURT (PAGE 713) : 'THE FINDING OF THE HIGH COURT THAT THE CLAUSES OF THE MEMORANDUM OF ASSOCIATION, VIZ., CLAUSES 10, 12, L3, 28 AND 29 DO NOT AUTHORIS E THE COMPAN Y TO ACQUIRE AND SELL SHARES AS BUSINESS HAS NO RELEVANCE IN VIEW OF THE AFORESAID RESOLUTION OF THE ASSESSEE AND OF THE FACT THAT IT HAD BEEN DEALING I N SHARES IN A COMMERCIAL SPIRIT AS IS EVIDENT FROM ITS CLAIM FOR LOSS IN DEALINGS IN THE SHARES OF M/S. TITAGHUR PAPER MILLS LTD. AND DEVALUATION OF SHARES OF M/S. PILANI INVES TMENT CORPORATION ON THE BASIS THAT THEY HAD FALLEN IN VALUE. SECONDLY, THE TRIBUNAL SAID THAT FROM 1947 TO 1956, NO DIVIDEND HAD BEEN DECLARED BY THE RAYON COMPANY AND THAT THE MONEY WHICH WENT INTO THE PURCHASE OF THESE SHARES WAS BORROWED BY THE ASSESSEE. IN OTHER WORDS , THE VIEW OF THE TRIBUNAL WAS, IT WAS WITH BORROWED FUNDS THAT THE ASSESSEE PURCHASED THE SHARES. IT IS NO DOUBT TRUE THAT THERE WAS NO EVIDENCE TO SHOW THAT THE MONEY W AS SPECIFICALLY BORROWED FOR THE PURPOSE OF BUYING SHARES. BUT THERE WAS EVIDENCE BE FORE THE TRIBUNAL FOR ITS FINDING THAT THE LIABILITIES OF THE ASSESSEE EXCEEDED ITS A SSETS. THE FINDING, THEREFORE, THAT THE SHARES WERE PURCHASED WITH THE BORROWED FUNDS ON WH ICH THE ASSESSEE WAS PAYING INTEREST, WAS A FINDING SUPPORTED BY EVIDENCE. THE REASONING OF THE TRIBUNAL THAT IT IS MOST IMPROBABLE THAT THE ASSESSEE WOULD BE INVESTIN G BORROWED MONEY ON WHICH INTEREST WOULD HAVE TO BE PAID IN SHARES WHICH YIEL D ED NO DIVIDEND WAS CORRECT. WE CANNOT SAY THAT THIS WAS NOT A RELEVANT CIRCUMSTANC ES FOR THE TRIBUNAL TO TAKE INTO CONSIDERATION FOR COMING TO THE CONCLUSION THAT THE TRANSACTION WAS AN ADVENTURE IN THE NATURE OF BUSINESS.' 5. IT WOULD APPEAR FROM THE AFORESAID FINDING THA T THE APEX COURT WAS OF THE OPINION THAT THE VIEW FORMED BY THE TRIBUNAL WAS A POSSIBLE VIEW IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE JUDGMENT IS NOT, HOWEVER, AN AUTHO RITY FOR THE PROPOSITION THAT SINCE PURCHASE WAS MADE BY BORROWED FUNDS, IT IS BOUND TO BECOME A BUSINESS TRANSACTION. ITA NOS.2800&2799/KOL/2013 DILIP B.DESAII (HUF). A.YR.2009-10 & 2006-07 14 THE TRIBUNAL IN THAT CASE HAD TAKEN A POSSIBLE VIEW . THEREFORE, THE APEX COURT DID NOT INTERFERE. 6. NO OTHER SUBMISSION WAS MADE. WE ARE OF THE OPINION THAT THE VIEW TAKEN BY THE LEARNED TRIBUNA L IN THIS CASE IS ALSO BASED ON EVIDENCE AND IS A P OSSIBLE VIEW. THERE IS, AS SUCH, NO REASON WHY THE HIGH COURT SHOULD IN TERFERE.) 7. FOR THE AFORESAID REASONS, WE REFUSE TO ADMIT THE APPEAL, WHICH IS, ACCORDINGLY, DISMISSED.' 5.3.6 PERIOD OF HOLDING OF SHARES WE FIND THAT ONE OF THE MAIN ARGUMENTS OF THE REVEN UE SEEMS TO BE THE SHORTER DURATION FOR WHICH THE SHARES WERE HELD BY THE ASSE SSEE. IN THIS REGARD, WE HAD GONE THROUGH THE ENTIRE DETAILS OF PROFIT ON SALE OF INV ESTMENT SCRIP WISE CONTAINING THE DATE OF PURCHASE, NUMBER OF SHARES PURCHASED, PURCHASE P RICE, DATE OF SALE, SALE PRICE AND RESULTANT BOOK PROFIT OR LOSS WHICH FORMS PART OF T HE PAPER BOOK FILED BY THE ASSESSEE. WE FIND FROM THE SAID WORKINGS OF PROFIT ON SALE OF INVESTMENTS, NONE OF THE SCRIPTS HAD BEEN SOLD BY THE ASSESSEE WITHIN A PERIOD OF 30 DAYS AS STATED BY THE LEARNED DR, EXCEPT KOTAK MAHINDRA MUTUAL FUND SHORT TERM PLAN W HICH WAS PURCHASED IN MARCH 2004 AND REDEEMED IN APRIL 2004. OTHER THAN T HIS, ALL OTHER SCRIPTS AND MUTUAL FUNDS WERE HELD FOR A MINIMUM PERIOD OF TWO MONTHS FROM THE DATE OF PURCHASE BEFORE ITS TRANSFER. WE ALSO FIND THAT CERTAIN SHARES WERE HELD BY THE ASSESSEE FROM MARCH 1995, OCTOBER 1996, DECEMBER 1998, MAY 2003, JUNE 2 003, JULY 2003, AUGUST 2003, SEPTEMBER 2003, OCTOBER 2003 ETC ONWARDS WHICH WERE ULTIMATELY SOLD BY THE ASSESSEE IN ASST YEAR 2005-06. SIMILARLY IN ASST YE AR 2006-07, FROM THE WORKINGS OF SHORT TERM CAPITAL GAINS FILED IN THE PAPER BOOK, W E FIND THAT ONLY THE PART OF THE SHARES OF DSP MERRILL LYNCH LTD AND GRAPHITE INDIA LTD WERE SOLD WITHIN A MONTH. OTHER THAN THESE TWO SHARES, THE AVERAGE PERIOD OF 4 MONTHS HAS BEEN MAINTAINED BY THE ASSESSEE FROM THE DATE OF PURCHASE. WE ALSO FIN D FROM THE WORKINGS OF LONG TERM CAPITAL GAINS FOR ASST YEAR 2006-07, THE SHARES WER E HELD FOR A PERIOD OF 13 MONTHS. THIS SHOWS THAT THE ASSESSEE ALWAYS INTENDED THESE SHARES TO BE RETAINED ONLY UNDER THE INVESTMENT CATEGORY AND IT WILL BE HIGHLY IMPRO PER TO STATE THAT THESE SHARES/UNITS WERE HELD AS STOCK IN TRADE BY THE ASSESSEE. WE FIND THAT THIS ASPECT HAS BEEN CONSIDERED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DY. CIT V. RELIANCE TRADING ENTERPRI SES LTD. IN ITA NO. 944/KOL/2008 DATED 3.1.2008 WHEREIN IT WAS HELD THAT : 'WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE REC ORDS AS WELL AS THE DOCUMENTS CONTAINED IN THE PAPER BOOK FILED BEFORE US. THERE IS NO DENYING THE FACT THAT AS PER THE ACCOUNT MAINTAINED THE ASSESSE E HAD ACTED BOTH AS A TRADER AS WELL AS INVESTOR IN SHARES AS PER THE MEMORANDUM AND ARTICLES OF ASSOCIATION. ACCOUNTS WERE MAINTAINED FOR TRADING/BUSINESS SHARE S WHICH ARE HELD AS STOCK IN TRADE AND SEPARATELY FOR INVESTMENT SHARES WHICH AR E HELD AND SHOWN IN BALANCE SHEET UNDER THE HEAD INVESTMENT REPRESENTING CAPITA L ASSETS. THE DECISIONS USED TO BE TAKEN BY THE ASSESSEE AT THE TIME OF PURCHASE ITSELF BASED ON DIFFERENT FACTORS WHETHER ANY SHARE AND SECURITY WAS TO BE HE LD AS INVESTMENT OR TRADING. WHEN THE SHARES ARE ACCOUNTED FOR IN THE BOOKS AS I NVESTMENT SHARES, THE VOLUME OF TRANSACTION OF SUCH SHARES CANNOT ALTER ITS STAT US FROM INVESTMENT TO TRADING. PROFIT ON SALE OF SUCH INVESTMENT SHARES HELD, AS C APITAL ASSETS ARE ASSESSABLE UNDER THE HEAD CAPITAL GAIN. PERIOD OF HOLDING OF S UCH ASSETS CANNOT DETERMINE ITA NOS.2800&2799/KOL/2013 DILIP B.DESAII (HUF). A.YR.2009-10 & 2006-07 15 ITS STATUS OR CHANGE IT FROM INVESTMENT (CAPITAL) T O TRADING (STOCK IN TRADE). THE AUDITED ACCOUNTS FOR THE ASSESSMENT YEAR 04-05 AND THE EARLIER YEARS PLACED IN THE PAPER BOOK MADE IT CLEAR THAT EVERY YEAR THE AS SESSEE HAD ACQUIRED SHARES FOR TRADING PURPOSE AND SEPARATELY ALSO FOR INVESTMENT PURPOSE WITH AN INTENTION TO EARN DIVIDEND INCOME IN ADDITION TO THE PROSPECT OF MAKING PROFIT ON SALE OF SUCH INVESTMENT SHARES AT AN APPROPRIATE OPPORTUNE MOMEN T WITHOUT MAKING ANY HURRY FOR SELF IGNORING DIVIDEND. THE INVESTMENT SH ARES AND SECURITIES PURCHASED AND HELD TILL THEIR SALE HAD DUAL PURPOSE I.E. FOR EARNING DIVIDEND AS AN INCIDENTAL INCOME AS WELL AS TO MAKE PROFIT ON SHARES AT APPRO PRIATE TIME. THE CONCLUSIONS DRAWN BY THE ASSESSING OFFICER BY TREATING THE INVE STMENT SHARES AS TRADING SHARES WAS BASED PURELY ON ASSUMPTIONS AND PRESUMPT IONS WITHOUT BRINGING ANY RECORD ANY MATERIAL OR EVIDENCE IN SUPPORT THEREOF. THE ASSESSING OFFICER DID NOT REJECT THE BOOKS OF ACCOUNTS VIS A VIS THE AUDITED ACCOUNTS U/S 145 OF THE IT ACT BEFORE ARRIVING AT SUCH A CONCLUSION. THE ASSESSING OFFICER'S FINDING CANNOT THEREFORE BE ACCEPTED.' 5.3.7 WE FIND THAT THE ASSESSEE HAD EARNED DIVIDEND INCO ME ALSO WHICH IS QUITE REFLECTIVE OF THE INTENTION OF INVESTMENT AND NOT F OR PROFIT MOTIVE THOUGH AN INVESTOR IS NOT PRECLUDED FROM REALIZING ITS INVESTMENT WHICH M AY RESULT INTO PROFIT IN FAVOURABLE CIRCUMSTANCES. 5.3.8 WE ALSO FIND THAT THE PRACTICE FOLLOWED BY THE ASS ESSEE BY OFFERING CAPITAL GAINS FOR INVESTMENT ACTIVITIES AND BUSINESS INCOME FOR T RADING ACTIVITIES IN THE EARLIER YEARS HAVE BEEN CONSISTENTLY ACCEPTED BY THE REVENUE IN S ECTION 143(3) PROCEEDINGS FOR THE ASST YEARS 2002-03 ; 2004-05 ; 2008-09 AND 2010-11, COPY OF WHICH ORDERS ARE PLACED ON RECORD BEFORE US. THE ASSESSMENT YEARS UN DER APPEAL BEFORE US ARE ASST YEARS 2005-06 AND 2006-07. WE DO NOT FIND ANY LOGIC AL REASON FOR THE REVENUE TO DEVIATE FROM ITS CONSISTENT STAND TAKEN IN THE EARL IER YEARS. IT IS ALSO EVIDENT FROM THE SCRUTINY ASSESSMENT ORDERS FOR ASST YEARS 2008-09 A ND 2010-11, THE REVENUE HAD ACCEPTED THE STAND OF THE ASSESSEE HAVING DUAL PORT FOLIO AND OFFERING INCOME UNDER CAPITAL GAINS AND BUSINESS INCOME IN SUBSEQUENT YEA RS. 5.3.9 WE FIND THAT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT (SUPRA) HAD CONSIDERED THE ISSUE UNDER CONSIDERATIO N AND HELD AS UNDER: '4.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BY THE LEARNE D AR BEFORE US. WE FIND THAT THE ASSESSEE HAS BEEN ENGAGING HIMSELF IN THE SHARE TRANSACTIONS BOTH AS AN INVESTOR AND AS WELL AS TRADER. IT IS SEEN THAT THE ASSESSEE HAD CLEARLY BIFURCATED THE INVESTMENT AND TRADING TRANSACTIONS INCLUDING S PECULATIVE SHARE TRANSACTIONS IN HIS BOOKS OF ACCOUNTS AND IT IS ALSO SEEN THAT T HE AVERAGE PERIOD OF HOLDING OF SHARES RANGE FROM ONE MONTH TO MORE THAN ONE YEAR A ND ACCORDINGLY SHORT TERM OR LONG TERM CAPITAL GAINS ARE DULY OFFERED TO TAX BY THE ASSESSEE DEPENDING UPON THE PERIOD OF HOLDING THE SHARES. IT IS ALSO SEEN T HAT THE LEARNED AO HAD ALSO ACCEPTED THE STAND OF THE ASSESSEE IN THE IMMEDIATE LY SUCCEEDING ASSESSMENT YEAR AS INVESTMENT TRANSACTIONS UNDER SCRUTINY PROCEEDIN GS VIDE 143(3) ORDER DATED 12.10.2009. WE FIND THAT THE FREQUENCY OF TRANSACTI ONS DOES NOT REALLY MATTER AND WHAT IS TO BE SEEN IS THE INTENTION OF THE ASSESSEE WHETHER HE WANTS TO PENETRATE INTO THE CAPITAL MARKET FOR THE PURPOSE OF INVESTME NT OR FOR MAKING SPECULATIVE GAINS BY DOING DAY TRADING AND DEALING IN FUTURES A ND OPTIONS. IT IS ALSO SEEN THAT THE LEARNED AO HAD CLEARLY STATED IN HIS ASSESSMENT ORDER THAT THE INTEREST ON ITA NOS.2800&2799/KOL/2013 DILIP B.DESAII (HUF). A.YR.2009-10 & 2006-07 16 BORROWINGS WERE PAID BY THE ASSESSEE ONLY FOR TRADI NG IN SHARES AND THIS ITSELF GOES TO PROVE THAT THE ASSESSEE HAD CLEARLY BIFURCA TED HIS ACTIVITIES INTO TWO PARTS - ONE TOWARDS INVESTMENT IN SHARES OUT OF OWN FUNDS OF THE ASSESSEE AND OTHER TOWARDS TRADING IN SHARES OUT OF OWN AND BORROWED F UNDS OF THE ASSESSEE. IT IS ALSO SEEN THAT THE ASSESSEE HAS BEEN DOING THIS ACT IVITY CONSISTENTLY. IT IS ALSO SEEN FROM THE BALANCE SHEET FILED BY THE ASSESSEE T HAT THE ASSESSEE HAD CLEARLY CLASSIFIED THE SHARE TRANSACTIONS UNDER THE HEAD IN VESTMENTS. THIS ITSELF CLEARLY PROVES THE INTENTION OF THE ASSESSEE THAT HE IS ONL Y INTERESTED IN SHARE MARKET ONLY AS AN INVESTOR AND NOT OTHERWISE. WE FIND THAT THIS ISSUE HAS BEEN ELABORATELY DEALT WITH BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. GOPAL PUROHIT REPORTED IN 228 CTR 582 (BOM.) , WHEREIN THE QUESTIONS RAISED BEFORE THE BOMBAY HIGH COURT A ND DECISION RENDERED THEREON ARE AS BELOW: (A) WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE ITAT WAS JUSTIFIED IN TREATING THE INCOME FROM SALE OF 7 ,59,003 SHARES FOR RS.5,00,12,879/- AS AN INCOME FROM SHORT TERM CAPITAL GAIN AND SALE OF 3,88,797 SHARES FOR RS.6,65,02,340/- AS LONG TERM CAPITAL GAIN AS AGAIN ST THE 'INCOME FROM BUSINESS' ASSESSED BY THE A. O. ? (B) WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE ITAT WAS JUSTIFIED IN HOLDING THAT PRINCIPLE OF CONSISTE NCY MUST BE APPLIED HERE AS AUTHORITIES DID NOT TREAT THE ASSESSEE AS A SHARE T RADER IN PRECEDING YEAR, IN SPITE OF EXISTENCE OF SIMILAR TRANSACTION, WHICH CANNOT IN A NY WAY OPERATE AS RES JUDICATA TO PRECLUDE THE AUTHORITIES FROM HOLDING SUCH TRANSACT IONS AS BUSINESS ACTIVITIES IN CURRENT YEAR? (C) WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW., THE HON'BLE ITAT WAS JUSTIFIED IN HOLDING THAT PRESENTATION IN THE B OOKS OF ACCOUNT IS THE MOST CRUCIAL SOURCE OF GATHERING INTENTION OF THE ASSESSEE AS RE GARDS TO THE NATURE OF TRANSACTION WITHOUT APPRECIATING THAT THE ENTRIES IN THE BOOKS OF ACCOUNTS ALONE ARE NOT CONCLUSIVE PROOF TO DECIDE THE INCOME? THE TRIBUNAL HAS ENTERED A PURE FINDING OF FACT THAT THE ASSESSEE WAS ENGAGED IN TWO DIFFERENT TYPES OF TRANSACTIONS. THE FIRST SET OF TRANSACTIONS INVOLVED INVESTMENT IN SHARES. THE SECOND SET OF TRANSACTIONS INVOLVED DEALING IN SHARES FOR THE PURPOSES OF BUSINESS (DES CRIBED IN PARA GRAPH 8.3 OF THE JUDGMENT OF THE TRIBUNAL AS TRANSACTIONS PURELY OF JOBBING WITHOUT DELIVERY). THE TRIBUNAL HAS CORRECTLY APPLIED THE PRINCIPLE OF LAW IN ACCEPTING THE POSITION THAT IT IS OPEN TO AN ASSESSEE TO MAINTAIN TWO SEPARATE PORT F OLIOS, ONE RELATI NG TO INVESTMENT IN SHARES AND ANOTHER RELATING TO BUSINESS ACTIVITI ES INVOLVING DEALING IN SHARES. THE TRIBUNAL HELD THAT THE DELIVERY BASED TRANSACTIONS IN THE PRESENT CASE, SHOULD BE TREATED AS THOSE IN THE NATURE OF INVESTMENT TRANSA CTIONS AND THE PROF IT RECEIVED THERE FROM SHOULD BE TREATED EITHER AS SHORT TERM OR, AS THE CASE MAY BE, LONG TERM CAPITAL GAIN, DEPENDING UPON THE PERIOD OF THE HOLDING. A F INDING OF FACT HAS BEEN ARRIVED AT BY THE TRIBUNAL AS REGARDS THE EXISTENCE OF TWO DIS TINCT TYPES OF TRANSACTIONS NAMELY, THOSE BY WAY OF INVESTMENT ON ONE HAND AND THOSE FO R THE PURPOSES OF BUSINESS ON THE OTHER HAND. QUESTION (A) ABOVE, DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW. IN SO FAR AS QUESTION (B) IS CONCERNED, THE TRIBUNA L HAS OBSERVED IN PARAGRAPH 8.1. OF ITS JUDGMENT THAT THE ASSESSEE HAS FOLLOWED A CONSI STENT PRACTICE IN REGARD TO THE NATURE OF THE ACTIVITIES, THE MANNER OF KEEPING REC ORDS AND THE PRESENTATION OF SHARES AS INVESTMENT AT THE END OF THE YEAR, IN ALL THE YE ARS. THE REVENUE SUBMITTED THAT A ITA NOS.2800&2799/KOL/2013 DILIP B.DESAII (HUF). A.YR.2009-10 & 2006-07 17 DIFFERENT VIEW SHOULD BE TAKEN FOR THE YEAR UNDER C ONSIDERATION, SINCE THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO ASSESSMENT PROCEE DINGS. THE TRIBUNAL CORRECTLY ACCEPTED THE POSITION, THAT THE PRINCIPLE OF RES JU DICATA IS NOT ATTRACTED SINCE EACH ASSESSMENT YEAR IS SEPARATE IN ITSELF THE TRIBUNAL HELD THAT THERE OUGHT TO BE UNIFORMITY IN TREATMENT AND CONSISTENCY WHEN THE FA CTS AND CIRCUMSTANCES ARE IDENTICAL, PARTICULARLY IN THE CASE OF THE ASSESSEE . THIS APPROACH OF THE TRIBUNAL CANNOT BE FAULTED THE REVENUE DID NOT FURNISH ANY J USTIFICATION FOR ADOPTING A DIVERGENT APPROACH FOR THE ASSESSMENT YEAR IN QUEST ION. QUESTION (B), THEREFORE, DOES NOT ALSO RAISE ANY SUBSTANTIAL QUESTION. IN SO FAR AS QUESTION (C) IS CONCERNED, AGAIN THERE CANNOT BE ANY DISPUTE ABOUT THE BASIC PROPOSITION THAT ENTRIES IN THE BOOKS OF ACCO UNT ALONE ARE NOT CONCLUSIVE IN DETERMINING THE NATURE OF INCOME. THE TRIBUNAL HAS APPLIED THE CORRECT PRINCIPLE IN ARRIVING AT THE DECISION IN THE FACTS OF THE PRESEN T CASE. THE FINDING OF FACT DOES NOT CALL FOR INTERFERENCE IN AN APPEAL UNDER SECTION 26 0A. NO SUBSTANTIAL QUESTION OF LAW IS RAISED. THE APPEAL IS ACCORDINGLY DISMISSED.' IT IS PERTINENT TO NOTE THAT THE DECISION OF BOMBAY HIGH COURT WAS SUBJECTED TO FURTHER APPEAL BY THE REVENUE BEFORE THE HON'BLE APEX COURT AND THE SPECIAL LEAVE PETITION (SLP) WAS DISMISSED BY THE SUPREME COURT. 5.3.10 WE ALSO FIND THAT THERE IS NO MATERIAL BROUGHT IN BY THE REVENUE TO SHOW THAT SEPARATE ACCOUNTS OF TWO PORTFOLIOS ARE ONLY A SMOK ESCREEN AND THERE IS NO REAL DISTINCTION BETWEEN TWO TYPES OF HOLDINGS. THIS COU LD HAVE BEEN DONE BY SHOWING THAT THERE IS INTERMINGLING OF SHARES AND TRANSACTIONS A ND THE DISTINCTION SOUGHT TO BE CREATED BETWEEN TWO TYPES OF PORTFOLIOS IS NOT REAL BUT ONLY ARTIFICIAL AND ARBITRARY. THEREFORE, IN ABSENCE OF ANY MATERIAL TO THE CONTRA RY, AND ON APPRECIATION OF CUMULATIVE EFFECT OF SEVERAL FACTORS PRESENT AS CUL LED OUT ABOVE, WE HOLD THAT THE SURPLUS IS CHARGEABLE TO CAPITAL GAINS ONLY AND ASS ESSEE IS NOT TO BE TREATED AS TRADER IN RESPECT OF SALE AND PURCHASE OF SHARES IN INVEST MENT PORTFOLIO. ACCORDINGLY, THE GROUND NO. 2 IN ITA NO. 1148/KOL/2009 FOR ASST YEAR 2005-06 AND GROUND NO. 1 IN ITA NO. 1437/KOL/2009 FOR ASST YEAR 2006-07 RAISED BY THE REVENUE ARE DISMISSED. 8.4. RESPECTFULLY FOLLOWING THE AFORESAID JUDICIAL PRECEDENTS AND IN THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LD CITA HAD RIGHTLY CLASSIFIED THE ASSESSEE AS AN INVESTOR AND TREATED THE GAINS RECEI VED ON SALE OF SHARES AND MUTUAL FUNDS AS SHORT TERM CAPITAL GAINS AS AGAINST BUSINE SS INCOME AND GRANTED RELIEF TO THE ASSESSEE. ACCORDINGLY, THE GROUNDS RAISED BY THE R EVENUE ARE DISMISSED. ITA NOS.2800&2799/KOL/2013 DILIP B.DESAII (HUF). A.YR.2009-10 & 2006-07 18 9. IN THE RESULT, THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 27.01.2017. SD/- SD/- [S.S.VISWANETHRA RAVI] [M.BALAGAN ESH] JUDICIAL MEMBER ACCOUNTANT MEMBE R DATE: 27.01.2017. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . DILIP B.DESAI, HUF, 1A, DEVARATI, 8- DR.RAJENDRA RO AD, KOLKATA-700020. 2 THE I.T.O., WARD-31(3), KOLKATA. 3 . C.I.T.(A)-XIX, KOLKATA, 4. CIT-XI, KO LKATA. 5 . DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES ITA NOS.2800&2799/KOL/2013 DILIP B.DESAII (HUF). A.YR.2009-10 & 2006-07 19